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It amazes me at how far to the political left is Silicon Valley. The startup ecosystem depends on the recycling of the profits from successful ventures into new

It amazes me at how far to the political left is Silicon Valley. The startup ecosystem depends on the recycling of the profits from successful ventures into new angel investment, venture capital funds, and bootstrapped ventures. An extreme example is Elon Musk, who famously netted $180 million from the Paypal sale and put every last dollar into founding Space X, Tesla, and Solar City. I'm assuming that money was taxed at the long term capital gains rate. If the cap gains loophole were closed, either Space X or Tesla would have been stillborn. Yet Silicon Valley regularly supports candidates and policies that would place large burdens on the entrepreneurial ecosystem. We have plenty of examples of high-tax, high-regulation economies around the world with no startup scene. You can't grow one by punishing success and preventing innovation. The deal that happened today means the top California cap gains tax is going up ~11% this year (PPACA, cliff deal, prop 30). That's 11% of new capital for startups being diverted from Palo Alto to Washington. (And yeah, I'm flagging this article because I don't like seeing pure politics on hacker news. But I'll participate while we're having the discussion)

Cookingboy 14y ago
Or maybe because for every Elon Musk who uses his money to create more opportunities for the market there are more Mitt Romneys who abuse the loopholes and use the money for more horses and car elevators. I love Silicon Valley due to the fact that people here actively CREATE wealth by producing ideas/products/companies with real, intrinsic values, which is a pretty big contrast to many of the folks on Wall Street.
- jacoblyles 14y ago
  Unfortunately, raising the taxes on the Wall St. guys is going to hit Silicon Valley too. The carried interest rate is probably less relevant for SV than the long-term cap gains rate. California cap gains going up by 12% this year (prop 30, PPACA, and the cliff deal) means that 12% of new capital for Silicon Valley startups is going to be diverted from Palo Alto to Washington.
  - justincormack 14y ago
    All tax rates are going to go up until the US and CA stop living beyond their means. Its not a matter of left or right or whether that hurts incentives any more.
  - prostoalex 14y ago
    You're right on the flow of capital. I think the big venture firms will still survive (a lot of East Coast endowment money and foreign sovereign funds), but angel investments will go down significantly, or just rely on smaller rounds, as there's less money to throw around.
natrius 14y ago
Progressive taxation is not leftist. Americans broadly agree on the concept. A 2011 WSJ/NBC poll found that 81% of Americans approved of increasing taxes on those who make more than $1 million. http://online.wsj.com/article/SB10001424052748704728004576176741120691736.html http://online.wsj.com/article/SB1000142405274870472800457617...
- jacoblyles 14y ago
  It's never surprising that a group of people wants to raise taxes on other people who are not them. It doesn't mean it's good governance. It's one of the classic problems of democracy - two wolves and a sheep voting on what to have for dinner.
  - smutticus 14y ago
    I think natrius was saying your definition of 'left' is skewed right. Progressive taxation enjoys broad support and so is by definition centrist and not left. This is a definition of left/right that depends on public opinion and not who controls the discourse. You could definitely argue that progressive taxation as defined by popular discourse in America is left. But that would be ceding too much power to the minority which controls political discourse in America, IMHO.
  - hythloday 14y ago
    I think many people would think of progressivism as two sheep and a wolf voting on what to have for dinner.
sliverstorm 14y ago
So what you're saying is Musk, had he been short 10-20 million of that $180, would have been completely unable to pull off Space X and Tesla? I'm not sure how you figure. Were you perhaps under the impression that Space X and Tesla were funded solely by Musk? Considering Tesla's operating expenses last year cleared $400M and they are currently in debt, I am fairly certain Tesla is not funded solely by Musk's pocket book. Anyway, so what if investments are taxed more heavily? So long as all types of investments are taxed equally, you will still have plenty of people investing in new business ventures.
- jacoblyles 14y ago
  Musk famously borrowed money to pay his rent after plowing all his capital into his businesses: http://pandodaily.com/2012/07/12/space-age-risks-and-profound-effects-on-humanity-why-elon-musk-is-thinking-bigger-than-the-internet/ http://pandodaily.com/2012/07/12/space-age-risks-and-profoun... I'm sure he would have found a way to make do with 1% less capital. But what if rates had been 9% higher, as they will be going forward? What if rates were 28% higher, as they would be if cap gains were treated as ordinary income? At some point, either Space X or Tesla would have never been made. The tragedy is that we will never know the future Space Xs that are never built.
  - davorak 14y ago
    So far I have only seen you mention the costs of the now increased taxes. What are the costs that would be payed if the taxes had not been increased?
myrandomcomment 14y ago
The tax rate on his $180M at the time he cashed out was the 39.5% rate that thing would have reverted to if this bill failed. So your point is? The 5% increase just cost me personally an additional 100K minimum on my 2013 tax bill and I am okay with that.
- jacoblyles 14y ago
  I'm pretty sure he was paying cap gains. You're quoting the ordinary income rate.
  - deleted 14y ago
    [deleted]
  - myrandomcomment 14y ago
    Clinton era tax for Capital Gains was 39.5%.
    - jacoblyles 14y ago
      Nope: http://en.wikipedia.org/wiki/File:Maximum_Federal_Tax_Rate_on_Long_Term_Capital_Gains_(1972_-_2012).jpg http://en.wikipedia.org/wiki/File:Maximum_Federal_Tax_Rate_o...
      - rprasad 14y ago
        The chart shows that you are both right. The marginal rate was 39.5%, then dropped as part of Clinton's deal with the House Republicans in his second term.
        jacoblyles 14y ago
        recheck your axes readings
jacques_chester 14y ago
> It amazes me at how far to the political left is Silicon Valley. Speaking as a foreign onlooker (I'm in Australia), I see more libertarians than any other stripe, tbqh. > Yet Silicon Valley regularly supports candidates and policies that would place large burdens on the entrepreneurial ecosystem. The Bay Area is home to San Francisco, a traditional hotbed of leftist activism. It's also home to UCB, a traditional hotbed of leftist activism. Some of the outlying suburbs are ... yes, traditional hotbeds of leftist activism. Mix in: 1. The relatively lower presence of traditional / conservative / "silent majority" voters who are motivated voters 2. That leftists are motivated voters 3. That libertarians are often not motivated voters 4. That voting in the USA is voluntary and not compulsory and the electoral calculus suggests that libertarians will be out-numbered by leftists at the ballot box.
- smsm42 14y ago
  Libertarians are very active on the internet, but are practically non-existant as a political force on national scale. Fortunately, in some places (not in California) some Republican representatives hold views which are close to what libertarians can identify with. But this has very little to do with motivation and a lot to do with the fact that very small minority of people have libertarian views. Libertarian views are not natural. It is very hard to arrive at the idea that "there should be a law against that" is not the right answer for any problem and stay there. Most people think freedom is overrated.
  - shitlord 14y ago
    > Most people think freedom is overrated Or maybe it's just that other people disagree with libertarians' notion of absolute freedom. Perhaps they define freedom differently. I'm sure most of us want the same things in life (like a decent standard of living), but we just can't seem to agree on the best ways to achieve them.
    - cookiecaper 14y ago
      It's about self-restraint. Libertarians believe government has very specific purposes and boundaries within which it must stay, and that other matters are totally irrelevant to governance. Non-libertarians want the classic "2 wolves and a sheep voting on dinner", libertarians say that dinner isn't even on the ballot. Of course, it's much easier to coerce people into doing the things you want them to do by making the desired behavior a matter of law than to convince each individual to cooperate and use his own free will to obtain the same result, so an undisciplined and unrestrained populace is going to disregard the "no voting on dinner" rule and use the force of the government to get what they want.
_delirium 14y ago
I think of Silicon Valley as on the economic center-right, but socially liberal. Lots of techno-libertarian rhetoric (I find myself well to the left of the average techie on that), but cultural-conservative rhetoric doesn't play well. Candidates who are anti-gay, anti-abortion, or playing up the importance of religion in public life don't play well. The GOP has had a strong element of that cultural-conservatism for a while now, strongly damaging its brand among some demographics. The Democrats end up as the default option more than what people strongly support (I know many more people who were fired up against the GOP rather than for the Democrats in the last election). Imo, the Democrats are a pretty miquetoast centrist party on economics, hardly "far left". They're broadly in favor of free trade with a modest safety net (quite modest, by first-world standards). Heck, I'm not sure more than a smallish minority of the party would even qualify as true social democrats, let alone actual leftists. On policy terms, I would disagree that tax rates are strongly relevant to a startup scene (not irrelevant, but not one of the more sensitive environmental factors). I do think regulation is an important aspect. One reason I would support discontinuing the use of regulations to achieve quasi-safety-nets and replacing them with direct safety nets. But as for why SV is in SV? I think culture, networks, and education have a bigger role in it. Otherwise you'd expect a vibrant startup scene in lower-tax parts of the U.S. than California, Massachusetts, and New York, and we aren't really seeing that.
- jacoblyles 14y ago
  It's unfortunate the CA GOP is too inept to adapt to local circumstances. It benefits them to have social moderates in congress from blue states - e.g. more Scott Browns in congress than Elizabeth Warrens. But it is a state party that suffers from long periods in the minority. Neither party really supports the issues that Silicon Valley cares about. The California Democratic caucus listens to Hollywood and unions more than SV. I agree that culture, social networks, and education matter more than issues to explain voting behavior. College-educated people vote for Democrats and leftist propositions, so S.V. does too.
Mvandenbergh 14y ago
Well this is partially because the alternative to the right, the Republicans, have gone full retard over the last two decades. A lot of people in the valley might vote for a moderate Republican like there used to be but will not vote for a party that puts someone who doesn't believe in evolution in charge of the House Science committee, regardless of their fiscal policy. >We have plenty of examples of high-tax, high-regulation economies around the world with no startup scene. Sure, but California is already high-tax compared to most of the US. Why isn't Silicon Valley in a state with no state level income or cap gains tax? There's a number of European countries that have marginal taxation similar to California, why isn't there start-up scene worth talking about there? There is one Silicon Valley in the whole world, sure there is plenty of innovation elsewhere, but for the software industry there is one stand-out and that is the valley. If there were a few of them then we could easily draw parallels between them and see what they have in common, as it is we can't do that because we have an n=1 situation where all we can do is speculate.
eli_gottlieb 14y ago
Yet Silicon Valley regularly supports candidates and policies that would place large burdens on the entrepreneurial ecosystem. We have plenty of examples of high-tax, high-regulation economies around the world with no startup scene. You can't grow one by punishing success and preventing innovation. Taxing capital gains and ultra-high incomes is not placing a burden on the entrepreneurial ecosystem. Hell, it's not even really left-wing at all. Further, in counterpoint: the Israeli economy supports a start-up scene larger than that of New York or Boston, second only to Silicon Valley, while paying marginal taxation rates that would have Americans squirming in their seats. We need high tax rates over here, because if we don't pay for the Army, we all die (or so the thinking goes). But also because a society without universal sick-fund membership or public higher education or scientific research grants or infrastructure projects would be uncivilized. (Seriously, if you think "progressive Democrats" are left-wing, allow me to introduce you to my friend Karl Marx.)
subsystem 14y ago
If you object to the level of discussion on the subject, why contribute to the problem by throwing around clichés?

Cookingboy 14y ago

Or maybe because for every Elon Musk who uses his money to create more opportunities for the market there are more Mitt Romneys who abuse the loopholes and use the money for more horses and car elevators. I love Silicon Valley due to the fact that people here actively CREATE wealth by producing ideas/products/companies with real, intrinsic values, which is a pretty big contrast to many of the folks on Wall Street.

jacoblyles 14y ago
Unfortunately, raising the taxes on the Wall St. guys is going to hit Silicon Valley too. The carried interest rate is probably less relevant for SV than the long-term cap gains rate. California cap gains going up by 12% this year (prop 30, PPACA, and the cliff deal) means that 12% of new capital for Silicon Valley startups is going to be diverted from Palo Alto to Washington.
- justincormack 14y ago
  All tax rates are going to go up until the US and CA stop living beyond their means. Its not a matter of left or right or whether that hurts incentives any more.
- prostoalex 14y ago
  You're right on the flow of capital. I think the big venture firms will still survive (a lot of East Coast endowment money and foreign sovereign funds), but angel investments will go down significantly, or just rely on smaller rounds, as there's less money to throw around.

natrius 14y ago

Progressive taxation is not leftist. Americans broadly agree on the concept. A 2011 WSJ/NBC poll found that 81% of Americans approved of increasing taxes on those who make more than $1 million. http://online.wsj.com/article/SB10001424052748704728004576176741120691736.html http://online.wsj.com/article/SB1000142405274870472800457617...

jacoblyles 14y ago
It's never surprising that a group of people wants to raise taxes on other people who are not them. It doesn't mean it's good governance. It's one of the classic problems of democracy - two wolves and a sheep voting on what to have for dinner.
- smutticus 14y ago
  I think natrius was saying your definition of 'left' is skewed right. Progressive taxation enjoys broad support and so is by definition centrist and not left. This is a definition of left/right that depends on public opinion and not who controls the discourse. You could definitely argue that progressive taxation as defined by popular discourse in America is left. But that would be ceding too much power to the minority which controls political discourse in America, IMHO.
- hythloday 14y ago
  I think many people would think of progressivism as two sheep and a wolf voting on what to have for dinner.

sliverstorm 14y ago

So what you're saying is Musk, had he been short 10-20 million of that $180, would have been completely unable to pull off Space X and Tesla? I'm not sure how you figure. Were you perhaps under the impression that Space X and Tesla were funded solely by Musk? Considering Tesla's operating expenses last year cleared $400M and they are currently in debt, I am fairly certain Tesla is not funded solely by Musk's pocket book. Anyway, so what if investments are taxed more heavily? So long as all types of investments are taxed equally, you will still have plenty of people investing in new business ventures.

jacoblyles 14y ago
Musk famously borrowed money to pay his rent after plowing all his capital into his businesses: http://pandodaily.com/2012/07/12/space-age-risks-and-profound-effects-on-humanity-why-elon-musk-is-thinking-bigger-than-the-internet/ http://pandodaily.com/2012/07/12/space-age-risks-and-profoun... I'm sure he would have found a way to make do with 1% less capital. But what if rates had been 9% higher, as they will be going forward? What if rates were 28% higher, as they would be if cap gains were treated as ordinary income? At some point, either Space X or Tesla would have never been made. The tragedy is that we will never know the future Space Xs that are never built.
- davorak 14y ago
  So far I have only seen you mention the costs of the now increased taxes. What are the costs that would be payed if the taxes had not been increased?

myrandomcomment 14y ago

The tax rate on his $180M at the time he cashed out was the 39.5% rate that thing would have reverted to if this bill failed. So your point is? The 5% increase just cost me personally an additional 100K minimum on my 2013 tax bill and I am okay with that.

jacoblyles 14y ago
I'm pretty sure he was paying cap gains. You're quoting the ordinary income rate.
- deleted 14y ago
  [deleted]
- myrandomcomment 14y ago
  Clinton era tax for Capital Gains was 39.5%.
  - jacoblyles 14y ago
    Nope: http://en.wikipedia.org/wiki/File:Maximum_Federal_Tax_Rate_on_Long_Term_Capital_Gains_(1972_-_2012).jpg http://en.wikipedia.org/wiki/File:Maximum_Federal_Tax_Rate_o...
    - rprasad 14y ago
      The chart shows that you are both right. The marginal rate was 39.5%, then dropped as part of Clinton's deal with the House Republicans in his second term.
      - jacoblyles 14y ago
        recheck your axes readings

jacques_chester 14y ago

> It amazes me at how far to the political left is Silicon Valley. Speaking as a foreign onlooker (I'm in Australia), I see more libertarians than any other stripe, tbqh. > Yet Silicon Valley regularly supports candidates and policies that would place large burdens on the entrepreneurial ecosystem. The Bay Area is home to San Francisco, a traditional hotbed of leftist activism. It's also home to UCB, a traditional hotbed of leftist activism. Some of the outlying suburbs are ... yes, traditional hotbeds of leftist activism. Mix in: 1. The relatively lower presence of traditional / conservative / "silent majority" voters who are motivated voters 2. That leftists are motivated voters 3. That libertarians are often not motivated voters 4. That voting in the USA is voluntary and not compulsory and the electoral calculus suggests that libertarians will be out-numbered by leftists at the ballot box.

smsm42 14y ago
Libertarians are very active on the internet, but are practically non-existant as a political force on national scale. Fortunately, in some places (not in California) some Republican representatives hold views which are close to what libertarians can identify with. But this has very little to do with motivation and a lot to do with the fact that very small minority of people have libertarian views. Libertarian views are not natural. It is very hard to arrive at the idea that "there should be a law against that" is not the right answer for any problem and stay there. Most people think freedom is overrated.
- shitlord 14y ago
  > Most people think freedom is overrated Or maybe it's just that other people disagree with libertarians' notion of absolute freedom. Perhaps they define freedom differently. I'm sure most of us want the same things in life (like a decent standard of living), but we just can't seem to agree on the best ways to achieve them.
  - cookiecaper 14y ago
    It's about self-restraint. Libertarians believe government has very specific purposes and boundaries within which it must stay, and that other matters are totally irrelevant to governance. Non-libertarians want the classic "2 wolves and a sheep voting on dinner", libertarians say that dinner isn't even on the ballot. Of course, it's much easier to coerce people into doing the things you want them to do by making the desired behavior a matter of law than to convince each individual to cooperate and use his own free will to obtain the same result, so an undisciplined and unrestrained populace is going to disregard the "no voting on dinner" rule and use the force of the government to get what they want.

_delirium 14y ago

I think of Silicon Valley as on the economic center-right, but socially liberal. Lots of techno-libertarian rhetoric (I find myself well to the left of the average techie on that), but cultural-conservative rhetoric doesn't play well. Candidates who are anti-gay, anti-abortion, or playing up the importance of religion in public life don't play well. The GOP has had a strong element of that cultural-conservatism for a while now, strongly damaging its brand among some demographics. The Democrats end up as the default option more than what people strongly support (I know many more people who were fired up against the GOP rather than for the Democrats in the last election). Imo, the Democrats are a pretty miquetoast centrist party on economics, hardly "far left". They're broadly in favor of free trade with a modest safety net (quite modest, by first-world standards). Heck, I'm not sure more than a smallish minority of the party would even qualify as true social democrats, let alone actual leftists. On policy terms, I would disagree that tax rates are strongly relevant to a startup scene (not irrelevant, but not one of the more sensitive environmental factors). I do think regulation is an important aspect. One reason I would support discontinuing the use of regulations to achieve quasi-safety-nets and replacing them with direct safety nets. But as for why SV is in SV? I think culture, networks, and education have a bigger role in it. Otherwise you'd expect a vibrant startup scene in lower-tax parts of the U.S. than California, Massachusetts, and New York, and we aren't really seeing that.

jacoblyles 14y ago
It's unfortunate the CA GOP is too inept to adapt to local circumstances. It benefits them to have social moderates in congress from blue states - e.g. more Scott Browns in congress than Elizabeth Warrens. But it is a state party that suffers from long periods in the minority. Neither party really supports the issues that Silicon Valley cares about. The California Democratic caucus listens to Hollywood and unions more than SV. I agree that culture, social networks, and education matter more than issues to explain voting behavior. College-educated people vote for Democrats and leftist propositions, so S.V. does too.

Mvandenbergh 14y ago

Well this is partially because the alternative to the right, the Republicans, have gone full retard over the last two decades. A lot of people in the valley might vote for a moderate Republican like there used to be but will not vote for a party that puts someone who doesn't believe in evolution in charge of the House Science committee, regardless of their fiscal policy. >We have plenty of examples of high-tax, high-regulation economies around the world with no startup scene. Sure, but California is already high-tax compared to most of the US. Why isn't Silicon Valley in a state with no state level income or cap gains tax? There's a number of European countries that have marginal taxation similar to California, why isn't there start-up scene worth talking about there? There is one Silicon Valley in the whole world, sure there is plenty of innovation elsewhere, but for the software industry there is one stand-out and that is the valley. If there were a few of them then we could easily draw parallels between them and see what they have in common, as it is we can't do that because we have an n=1 situation where all we can do is speculate.

eli_gottlieb 14y ago

Yet Silicon Valley regularly supports candidates and policies that would place large burdens on the entrepreneurial ecosystem. We have plenty of examples of high-tax, high-regulation economies around the world with no startup scene. You can't grow one by punishing success and preventing innovation. Taxing capital gains and ultra-high incomes is not placing a burden on the entrepreneurial ecosystem. Hell, it's not even really left-wing at all. Further, in counterpoint: the Israeli economy supports a start-up scene larger than that of New York or Boston, second only to Silicon Valley, while paying marginal taxation rates that would have Americans squirming in their seats. We need high tax rates over here, because if we don't pay for the Army, we all die (or so the thinking goes). But also because a society without universal sick-fund membership or public higher education or scientific research grants or infrastructure projects would be uncivilized. (Seriously, if you think "progressive Democrats" are left-wing, allow me to introduce you to my friend Karl Marx.)

subsystem 14y ago

If you object to the level of discussion on the subject, why contribute to the problem by throwing around clichés?